Post Hoc Ergo Propter Hoc

A commenter correctly corrected me with regard to the Africa-Israel Group (which I have been inadvertently calling Israel-Africa). She also pointed me to one of those “divestment-is-on-the-march, wind-at-its-back” stories which noted that protests against the company (which I’ll now call A-I) have actually been taking place for several years. This, I suppose, was meant to counter my assertion that the call by 50 TIAA-CREF members to divest from the Israeli company came after the company had already divested, and thus could not be the cause of that decision.

Given that the Adalah group (the organization which organized the push to get TIAA-CREF to divest from Africa-Israel as a form of political protest) has already admitted that its call took place after CREF’s financial decision to divest had already been made, and given that TIAA-CREF itself has made it absolutely clear that its decision to sell A-I shares had nothing to do with politics (either its own, or the politics of outside protestors), I think we can pretty much put the “TIAA-CREF has joined the BDS campaign” story to bed.

But wasn’t Africa-Israel already controversial before the TIAA-CREF decision? And couldn’t some of the general BDS protest against the company have affected CREF’s investment choices earlier this year? Here we have entered the realm of what is known as a “post hoc ergo propter hoc“ fallacy. This translates roughly to “before, thus caused by.” In other words, it makes the case that since one event preceded another, then the first event must have caused the second.

If you’ll pardon my reduction ad absurdum, this is the fallacy behind the argument that the cock crowing causes the sunrise. No one can argue that a cock’s crow preceded the sun coming up, but to prove that this noise is responsible for the sun rising one must prove (not simply assert) causality (ideally providing a mechanism whereby one event triggers another).

Clearly, Africa-Israel (like many Israeli companies or US and European companies doing business in Israel) has been subject to harassment by boycotters for years, with calls to divest from Israel being broadcast on and off for decades. And during that period, some investors have both bought and sold stocks in these targeted companies.

In the case of Africa-Israel, we now know that Adalah’s specific protest could not have caused TIAA-CREF’s sell-off (unless one is ready to believe the argument that a later event caused an earlier one). My commenter has asserted that other protests took place before TIAA-CREF divested and that this provides proof that CREF’s decisions were BDS-related and political. But could there be another, simpler explanation? Might the fact that A-I’s shares plummeted in price due to the company’s huge debt be a more likely explanation as to why TIAA-CREF and other investors have rid themselves of A-I shares (many via automatic indexing mechanisms)?

It strikes me that much of what passes for BDS “success” in 2009 falls under the category of post hoc fallacy, frequently picked up by an uninformed media. Students ask Hampshire College to divest from Israel. Hampshire College changes its divestment portfolio in ways that impact some (but not all) Israel-related investments. Ergo “Hampshire has divested” (disregarding the fact that the college maintains investments in other Israeli companies and has said specifically that its choices had nothing to do with Israel). People picket Motorola. Motorola sells a business unit to Israel. Thus Motorola has followed BDS dictates (regardless of the fact that plans to sell the unit were already in the works before protests ramped up, and that Motorola has made it clear that this was a simple business decision to sell an orphan unit to a partner). Etc., etc.

Now to be fair, I’ve made the assertion that a year of this type of fallacy laden fraud may represents a specific strategy by the BDS crowd to claim victory for decisions that had nothing to do with their efforts, all in an effort to manufacture momentum for a divestment movement that has been in retreat for the last five years. It remains to be seen if my argument of fraudulence following failure is a post hoc fallacy or simply a reasonable theory that requires further evidence to confirm.

BlackRock has a very strict policy on not commenting on single investments. Therefore, they are not able to give further statements on what in the Norwatch coverage is untrue, or the actual reasons of the divestment.

“Which allegations are untrue in the story?”

“The allegations which are factually incorrect are those within the article that refer to our reasons behind our decision to divest our holding in the company”, Phillips answered, in what was to become a longer email exchange.

“So is it untrue that you divested as a result of the 3 mentioned Scandinavian banks taking action? Or is it untrue that you divested due to the legal-political-ethical dilemmas attached to Africa-Israel's operations on the West Bank?”, Norwatch asked.

“Our decisions to buy or sell stocks are based on our investment process”, Phillips answered, without wishing to clarify further.

It is thus unclear whether BlackRock wishes to refute the allegation that they divested from the West Bank investments due to the ethical controversies, or whether it is untrue that they left the West Bank as as result of the Scandinavian pressure. In either way, they confirm having divested from the controversial firm.

As a friend in the medical profession once told me, if you hear hoofbeats behind you, assume it's a horse and not a zebra.

There are certainly different possibilities as to why companies have divested in A-I, including (A) Protests from divestment advocates, (B) the fact that A-I is $5 billion in debt, has no clear way for paying it off and it's stock price has plummeted as a result, or (C) Christ came to the head of Blackrock in a dream and told him if he sold off his A-I shares, he would be rewarded by going to the “Land of Candy” when he died.

Absent inside knowledge (but listening to what the organization has said publically and understanding how financial institutions normally work), I would guess B is the most likely answer, although A & C are in a good tie for second.